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Novartis (NVS) to Focus on US Markets Backed by 8 Key Drugs

Swiss pharma giant Novartis NVS recently outlined a new strategy with a primary focus on gaining market share in the U.S. markets.

The company’s initiative to transform into a pure-play Innovative Medicines company is nearing completion.

Novartis is looking to focus on strengthening its solid position in five core therapeutic areas (Hematology, Solid Tumors, Immunology, Neuroscience and Cardiovascular).

Backed by eight current in-market brands, Cosentyx, Entresto, Zolgensma, Kisqali, Kesimpta, Leqvio, Pluvicto and Scemblix, Novartis aims to improve competitive positioning and organically build its business in the United States to become a top-five player in the country by 2027. The company believes that each drug holds multi-billion dollar peak sales potential. Per management, a ‘U.S.-first’ mindset, an increasing share of U.S. patients in clinical studies and building capability and talent, among other actions, will enable it to achieve this objective.

Novartis also aims to be a top-three player in in China while maintaining leading positions in Germany and Japan.

Concurrently, the company is looking to shift its portfolio of medicines toward biologics and technology platforms. Novartis will prioritize three newer platforms – gene & cell therapy, radioligand therapy and ‘xRNA’ – for continued investment in new R&D capabilities and manufacturing scale, in addition to two established platforms in chemistry and biotherapeutics.   The company currently has more than 50 projects in exploratory to early clinical development, which puts it in a formidable position to develop these platforms and expand its business presence.

The company expects sales to grow at a compounded annual growth rate of 4% in the 2021-2027 time frame due to these initiatives.

Novartis further stated that it has already distributed $53 billion to shareholders from 2017-2021 and will continue to follow a disciplined shareholder-focused approach to capital allocation.

Shares of Novartis have lost 11.8% so far this year compared with the industry’s decline of 5%.

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Last month, it announced plans to spin off Sandoz into a new publicly traded standalone company to separate this business following a strategic review. This was because industrywide price competition among generic pharmaceutical companies and consolidation of buyers caused significant declines in sales and profits of Sandoz, particularly in the United States. The spin-off will be completed by the first half of 2023.

Sandoz generated $9.6 billion in sales in 2021. Upon separation, the standalone Sandoz would be headquartered in Switzerland and listed on the SIX Swiss Exchange, with an American Depositary Receipt (ADR) program in the United States.

The separation will enable Novartis to focus better on its legacy pharmaceutical business. Novartis had earlier spun off its eye care division Alcon into a new company.

In April, NVS announced a new organizational structure to accelerate growth, strengthen its pipeline and increase productivity.  The changes are expected to generate SG&A savings of $1.5 billion (the previous target of $1 billion) to be fully embedded by 2024.

In 2021, Novartis sold its 33% stake in Roche RHHBY for $20.7 billion. The company has been a shareholder of RHHBY since May 2001. Novartis was reportedly looking for strategic acquisitions in the pharma space using the cash proceeds from its stake sale in Roche.

It carries a Zacks Rank #3 (Hold). A couple of better-ranked stocks in the sector are Sanofi SNY and Bolt Pharmaceuticals BOLT. Both carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earnings estimates for Sanofi are up 4 cents each for 2022 and 2023. Sanofi surpassed estimates in all of the trailing four quarters, the average being 9.37%.

Loss estimates for BOLT have narrowed to $2.25 from $2.87 in the past 60 days. BOLT surpassed earnings in three of the trailing four quarters, the average being 2.39%.

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